Is Bitcoin Good As Gold Or A Volitile Bubble Ready To Pop?

I’ve been following the stock market for over 30 years and when we recently had to drop Payza as a payment processor because they pulled out of the U.S. market, I felt it was time to research Bitcoin as a payment option. Below are some of my findings so far.

In a Nutshell…

Bitcoin Upside:Supply & Demand

With only 21 million bitcoins in the world to be had, simple supply and demand will drive up the price of this theoretically speaking. Given that, there could be a big financial benefit to owning bitcoins and including them as a payment method.

Bitcoin Downside:Political Power Control and Volatility

There is no way that the powers to be will let a virtual currency destabilize their own currency. Case in point, the China’s central bank announced regulations forbidding financial institutions from handling Bitcoin transactions yesterday (Dec, 5th 2013) causing some huge wild swings in Bitcoin prices to the downside. As this thing gets larger and more popular, expect more of this.

My Take…

I personally find the Bitcoin concept fascinating but the lack of any regulation makes this a safe haven for those with bad intentions. Because of the money involved, there are many hackers and scam artist targeting this as the new gold rush. Do your homework before joining some of these exchanges because they are not all legit and many people have already been scammed.

There are higher risks involved with this virtual currency but it could be argued that no virtual currency is as safe as we may think. The Payza debacle was a prime example of just how vulnerable all virtual payment methods are to the fluctuating dysfunctional policies of politicians across the globe that create our laws.

In Conclusion….

Avoiding risks in this day and age would mean you wouldn’t invest in anything…. ever! There are many people that are doing just that so don’t feel you are alone if you sit on the sidelines during this age of volatility. Given that reality, If you come to terms with the risks involved and decide to play in this arena, I would recommend you buy on the dips just like you would in the stock market. If you are going to use this as a payment processor, you should also pay attention to what is happening and sell portions of your bitcoins on highs and buy more on lows. Here’s the daily prices http://bitcoincharts.com/markets/currencies/

It would appear volatility is going to become a part of the bitcoin financial market as it gains momentum but be careful to watch political news on what the world powers are doing. The move China made on Dec. 5th can be a sign of future trouble for this virtual currency. The U.S. hasn’t taken any steps in regulating bitcoin as of yet.